In the scenario where inventory is ordered but not sold, what is the change in inventory on the Balance Sheet?

When inventory is ordered, it indicates that a company has purchased goods that will be part of its inventory, and this reflects a change in assets on the Balance Sheet. Specifically, when goods are ordered and received, the company recognizes an increase in its inventory account because the physical goods are now part of what the company owns.

This increase reflects the value of the goods that have been added to the inventory, which is categorized as a current asset. Even if the inventory is not yet sold, the act of ordering and receiving these goods means they are now reported as assets on the Balance Sheet. Thus, the correct response is that inventory increases as a result of the order.

This understanding is crucial for accurate financial reporting and inventory management, indicating that the company's resources are growing with the addition of newly ordered goods, even though they have not yet generated revenue through sales.